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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1012853202445

Date of advice: 3 August 2015

Ruling

Subject: Beneficial ownership

Question 1

Are you required to include the dividends in your assessable income?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commences on:

1 July 2013

Relevant facts and circumstances

You purchased shares as guardian for your child when they were a minor.

Your child has always received the franked dividend into their own bank account.

You child has declared the franked dividends as income on their income tax return since they began working.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Beneficial ownership

A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106.  A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset.

A legal owner is the individual who has their name on the legal documents associated with the capital gains tax (CGT) asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is entitled to income earned from the asset and liable for capital gains tax upon sale of the asset.

In some cases, an entity may hold a legal ownership interest in property for another individual in trust.

Application to your circumstances

In this case, you purchased the shares on behalf of your child while they were a minor. The dividends that relate to the shares have always been deposited into your child's bank account. They have declared the income in their income tax return since they began working. We accept that you are holding the shares on trust for your child and that they hold the beneficial ownership. Therefore, you are not required to declare the dividends from the shares as income in your income tax return.


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